Car insurance is one of those ‘must haves’ when you own a car. The old saying goes that if you can’t afford to pay for the insurance, you can’t afford to have the car.
While insurance is vital, so is getting it for the right price. There are so many car insurance providers that one can easily become overwhelmed and simply settle for renewing an old policy or blindly accepting the first offer you get. Let’s face it, shopping for car insurance isn’t exactly fun.
But I’ll tell you what is fun? Saving money on your car insurance and in turn pocketing an extra couple of hundred dollars (in some cases, thousands of dollars) a year by simply making smart, well informed decisions when it comes to purchasing your car insurance.
Regardless of whether you park your car two blocks away from the party and act like you walked (aka third party insurance for cars that are a little, ahem, older and less valuable) all the way to full blown comprehensive car insurance for your pride and joy. The savings you can make on car insurance will make you smile.
Here is how to pay less for car insurance
How to save money on car insurance
Three things you must do to save money:
- Know the exact worth of your vehicle. Don’t insure for more.
- Don’t be afraid to shop around and play providers off against each other.
- Understand the risk/reward principle of increasing your excess for lower premiums.
These three core principles are the key to saving on car insurance. Using them will give you the framework for getting a better deal and in turn lowering the cost of your car insurance.
How much is your car actually worth? Don’t be emotional here.
Firstly you must know the exact worth of your car. This may sound straight forward but most people often insure their car for whatever the ‘recommended’ value shown in the insurance provider’s website. This means you could be insuring your car for MORE than it is worth and in turn paying for it, or alternatively, you may be missing out on required cover for replacing your car.
Renewal tip: remember that most car insurance providers when they send you renewals will continue to keep your car value at the desired price you entered. However after a year, wouldn’t you agree it is smart to check if the car price has actually come down? No point paying extra for a higher sum when the car is worth less.
Shop around, car insurance premiums can vary dramatically based on providers
While I won’t harp on about how wise it is to compare insurance prices before buying, what I will quickly say is that this is the smartest tip you can follow.
Use car insurance comparison websites to get a baseline figure of what you think your car insurance may cost. From there, ring providers individually for a phone quote – tell them you are shopping around and will need the best possible price to accept.
While many providers will ask you ‘who else have you got a quote from?’ – try and avoid answering that just yet. Instead tell them you are wanting a competitive quote and would rather not say.
As a general rule of thumb, many providers have a speciality when it comes to car insurance.
- NRMA – Better for older Australians and people with a long driving history.
- Just Car Insurance – Largely for younger drivers and modified vehicles that other insurers would dismiss.
- AAMI – All round insurers that are willing to compete on your car insurance price. Variable excesses can quickly cut costs also.
- Bingle car insurance – low cost, no frills insurance. Meant to be super cheap, but am still yet to see a huge saving compared to other providers.
- Youi Car insurance – they ask you heaps of questions in the hope you can lower your premium. While this didn’t work for me, it has for others. I think if you are in your 20’s you aren’t going to go well here.
Regardless of who you call, use their online car insurance quote systems to get an understanding of just what kind of insurer they are (for example, I won’t name which one above – but their premiums are always 50% more expensive for no justifiable reason when I get a quote).
For big savings, consider your car insurance excess
Excess is the amount you will pay if you do indeed need to make a claim. For me, I put my excess higher – as the way I see it, I won’t be making claims for little dings and dents. Instead, I will be willing to pay a larger excess if it means that I will replace my entire car or similar after a major incident.
What this means however is you need to weigh up your risk profile and just how much risk you are willing to take.
This is called a ‘variable excess’ and lets you slide between prices with different excesses in order to see what price you can get.
You could potentially pay a full premium price and have a really small excess – for instance, premium of $1000 a year with an excess of $200.
Though some car insurance providers will let you increase that excess in order to reduce the premium. So instead of a $1,000 premium, it might instead by $300 – with an excess of $900 or similar. This means that you make upfront savings and will only need to pay extra should you ever make a claim.
Perfect for someone like me who rarely uses my car and has never had an accident (touch wood). I would personally rather pocket the upfront savings and pay more SHOULD I need too, rather than immediately.
Final tips for saving money on car insurance
- Remember to always check that the policies you are price comparing are the same. One may be cheaper but may not give you the right cover. Always check that you are comparing apples with apples.
- If you are younger, ask whether your insurance provider will reduce the premium if you go on an advanced driver’s course. Can be a great way to save $50 or so after the cost of the course + you will learn a lot.
- Consider restricting drivers. E.g. not allowing younger people or other people to drive your car. The more people you allow to drive your car (or identify on your policy) the more it will potentially cost.
Below is my true story of how I personally saved on car insurance
The other day I had to renew my 3rd party and comprehensive insurance policy for my car. Normally I am looking at $320 for a Greenslip and $700 a year in comprehensive insurance.
I shopped around and managed to save myself $400 in the space of 5 minutes. Instead of just renewing my insurance (which I nearly did, as I recall them been the best a year ago and thus not worth the effort of moving from), I decided to see what had changed over the past year and whether I could get a better deal.
I ended up getting a quote for the exact same policy but with a provider a previously deemed ‘too expensive’ – not sure why they were so much cheaper a year later, perhaps it was my age or perhaps it was a change in their pricing in general.
I also learn’t that you should never trust the online quote system, while it does give a good indication of rough price – it definitely isn’t accurate.